Sesame Credit: Data-Driven Credit Scoring

Launched in June 2015, Sesame Credit under Ant Financial Services Group is an Alibaba affiliate well-known for Alipay, Yu’e Bao and Zhao Cai Bao. It is also the first-of-its-kind credit scoring service in China.

Sesame Credit leverages a sea of data from various sources, and is powered by big data technology, customer behaviour analytics and cloud computing. It aims at making credit more accessible to millions of people, especially to consumers and small business owners who might have little credit history at traditional credit agencies but are active Internet users.

I stumbled on this new feature in Alipay Wallet mobile app recently, and after I explored it, I was truly amazed by how creative and accurate it is. It taps into vast amounts of both online and offline data, processes it and builds a unique credit score for me.

Sesame Credit Score

The credit score Sesame Credit gives to an individual ranges from 350 to 950. The higher the score, the more creditworthy this person is deemed. Sesame Credit scores are calculated based on five distinctive factors, each taking into account the different types of data collected from reliable sources. This includes Alibaba’s large database of its e-commerce websites, its payment system Alipay, government’s database such as China’s Public Security Ministry and State Administration of Taxation as well as information provided by other financial institutes and credit agencies.

5 factors

Credit History – reflects a user’s past payment history and indebtedness. This consists of areas such as credit card repayment, utility bill payments and ratings on e-commerce website such as Taobao.

Fulfillment Capacity – reflects the user’s ability of adhering to contracts such as financial products and loans. It is evaluated based on asset information, including payment for social insurances (similar to the Central Provident Fund in Singapore), properties and cars, etc. Indicators also include use of Alibaba’s financial products / services and Alipay account balances.

Identity Characteristics – rates the extent and accuracy of user’s personal information. For example, home address, length of time of residence, mobile phone number, education level and employment. User can fill in information or import information from LinkedIn or other external systems.

Social Relationship – reveals the user’s influence within his/her network, his/her influence to the network and his/her friends’ credit scores.

Sesame Credit delivers very good user experience with their well-designed features and user-friendly interface. It was almost intuitive for me to start using this service. In addition, Sesame Credit is very practical for users who lack collateral and credit record in banks as the app fills the gap of credit assessment service without extra charge. Furthermore it was selected by the central bank in China to run independent individual credit scoring service legitimately.

Application of Loans

Sesame Credit also enables consumers and small business owners to apply for loans via Alibaba’s financial services. The application process is greatly simplified compared to application for loans from the banks. The best part is that the loan can be received instantly! It provides significant convenience and accessibility to millions of users.

Application of Travel Visa

Besides leveraging on the huge online ecosystem Alibaba has built, Sesame Credit attracts users with numerous additional benefits. For example, by providing their Sesame Credit scores, Chinese Alipay users could apply for travel visa without providing any documentation proofs as long as they meet certain credit score criteria (e.g. 700 for Singapore visa, 750 for European Union visa). Moreover, users can get car rental services and hotel booking without paying for reservation fees or upfront deposit. A fast pass of registration for online dating is even provided!

Many may argue that credit rating is a serious business, and the use of it should be restricted for the sole purpose of lending, jobs, insurance and rent. To add to that, Sesame Credit promotes its service through cooperation with various merchants which makes it look like a marketing gimmick. But in my point of view, Sesame Credit is innovative, and adaptive to the current social values and trends.

It makes life easier for consumers and small business owners, and helps them realize the importance of keeping a good credit history, thereby developing a healthy economic and social environment. Its state-of-art technology expands the horizon of traditional credit agencies and increases the efficiencies of many businesses.

Nevertheless, it is true that the credit scores might be biased because the majority of data is from Alibaba’s database. Sesame Credit will have more credibility if banks and fintech startups adapt the idea and come onboard. It will be a win-win for both parties as Sesame Credit can provide a more well-rounded scoring while other financial service providers are able to tap into uses’ online behavior data easily. I hope to see the credit-scoring system expanded much widely in the near future.

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